AlJazira Cap says Zain KSA Q1 2021 profit misses estimates, maintains ‘Overweight’

Logo of Mobile Telecommunication Co.

Mobile Telecommunication Co.’s (Zain KSA) net profit of SAR 41 million for Q1 2021, came below estimates set by AlJazira Capital and consensus estimates’ of SAR 59 million and SAR 48 million, respectively, the brokerage said in an earnings review report.

The deviation from the estimate was mainly due to lower-than-expected revenue and gross margin. Total revenue fell due to the continued impact of COVID-19, which caused a decrease in demand for the company’s services. Revenues from visitor’s packages and roaming services are likely to have impacted most due to the pandemic, the report added.

However, expected pick up in vaccination and reopening international borders would help the company’s top line to recover in H2 2021. Furthermore, the company’s margins are also expected to be lower in 2021, as the reversal of provisions related to the settlement royalty fees with government are not expected this year.

AlJazira Capital added that the bottom line is anticipated to get support from the lower finance cost due to capital restructuring, decrease in total debt and lower interest rates. Thus, with deleveraged and healthier balance sheet, the telco remains strong financially, while short-term pressure is likely to continue on some operating segments.

Meanwhile, the brokerage said that Zain KSA and Etihad Etisalat Co (Mobily) received approval from the Communications and Information Technology Commission (CITC) to form a consortium to merge tower businesses of the two companies, which if finalized, will be beneficial for the company.

AlJazira Capital maintained its “Overweight” recommendation on Zain KSA, setting the target price at SAR 16.5 per share